Small business guide for equipment financing

By Joseph Brady

As a small business owner, it will be necessary to replace or upgrade various pieces of equipment on a regular basis. During this period, equipment loans are like a lifeline to any business owner. You might wonder what the benefits of equipment loans are. Or what criteria lenders look for before approving equipment loans.

What is equipment financing?

Equipment Loans are, as their name would suggest, loans that are used to lease or buy equipment. Small businesses often need to purchase, repair, or replace their equipment. Based on your business needs, there might be equipment that are crucial to extract maximum efficiency and productivity.

The need for this equipment will either be short-term or long-term. Accordingly, you can either purchase or lease the equipment. There are many types of equipment loans, some that even fund for only one type of equipment. You can analyze these different types present in the market before finding the best fit for your business.

Equipment financing for small businesses is self-secure loans that are explicitly meant for purchasing items that in turn acts as collateral for the loan. Each lender has different terms with a loan; a small business owner can finance around 80% of the total purchase price of the equipment using small business equipment financing. When you choose to buy your equipment for business and finance through a loan, you own the equipment from day one. A 20% down payment is generally required for most small business equipment loans.

What is equipment leasing?

Leasing gives your small business more flexibility than a loan. Either you can return the equipment at the end of the lease, or you can purchase it for a short amount once the principal of the loan has been paid in full. Leasing generally does not require a down payment. It is beneficial for businesses with little to no available capital. Even if the down payment is needed, it is comparatively small to that of a traditional loan down payment.

You can get funded around 100% of the cost of the product along with 20 to 25% of the soft costs (i.e., any taxes or delivery charges) with a lease.

How do you apply for equipment financing?

An application process for equipment loan can be a simple process depending on the equipment lender you are working with. You’ll need to prove the financial health of your business along with the tax returns and bank statements.

Equipment lenders generally ask for information about the equipment you’re buying with financing. That’s why most lenders demand an equipment quote or equivalent documentation of the equipment cost along with the application.

Documents needed to apply for equipment financing:

-Bank Statements

-Identification proof

-Business Tax Returns

-Voided Business Check

-Credit Score

-Equipment Quote

Therefore you will have to decide whether a business equipment loan is right for you. Take a look at your business finances and check to see if you can save some money even if you spend a considerable amount right now. If yes, then your business finances are surely healthy else this huge expense can hurt your regular cash flow.

Even if you can’t afford it, saving up to purchase it later will lead to lost profits. Instead, you can opt for equipment financing with a small business equipment loan. Plan your finances well, the right piece of equipment can bring in more revenue than the equipment financing loan interest is costing you.


Joseph Brady is vice president of Digital Marketing for Reliant Funding, a provider of short-term working capital to small and mid-sized businesses nationwide. He has more than 14 years of experience in B2B digital marketing, optimization, and operations, with a focus in the financial services market.

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